Earthquake Sound Corp. v. Bumper Industries

• Decision Date: 16 December 2003
• Docket Number: No. 00-16532.,No. 01-15121.,00-16532.,01-15121.
• Parties: EARTHQUAKE SOUND CORPORATION, Plaintiff-Appellee, v. BUMPER INDUSTRIES, Defendant-Appellant. Earthquake Sound Corporation, Plaintiff-Appellee, v. Bumper Industries, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

352 F.3d 1210

EARTHQUAKE SOUND CORPORATION, Plaintiff-Appellee, v. BUMPER INDUSTRIES, Defendant-Appellant.

Earthquake Sound Corporation, Plaintiff-Appellee, v. Bumper Industries, Defendant-Appellant.

No. 00-16532.

No. 01-15121.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 3, 2002 — San Francisco, California.

Filed December 16, 2003.

John H. Pelzer, Koorosh Afshari, Fort Lauderdale, FL, for the appellant.

Koorosh Afshari and Gregory N. Owen, Owen, Wickersham & Erickson, P.C., San Francisco, CA, for the appellee.

Appeal from the United States District Court for the District of Nevada; Lloyd D. George, District Judge, Presiding. D.C. No.CV-95-00563-LDG(RLH).

Before Warren J. Ferguson, Melvin Brunetti, and A. Wallace Tashima, Circuit Judges.

Opinion by Judge Brunetti; Concurrence by Judge Ferguson

OPINION

BRUNETTI, Circuit Judge.

These consolidated appeals concern two attorney's fees orders arising from a trademark infringement suit. For the reasons stated in this opinion, we affirm.

I. Background

A. Prior Proceedings

Appellee Earthquake Sound Corporation ("Earthquake") and Appellant Bumper Industries ("Bumper") sell car audio equipment. Earthquake sued Bumper in 1995 for trademark infringement in violation of 15 U.S.C. § 1114, unfair competition in violation of 15 U.S.C. § 1125(a), and trademark infringement and deceptive trade practices in violation of state law. Earthquake claimed that Bumper's use of the word "Carquake" on car audio products infringed its "Earthquake," "Bass-Quake" and "Quake" marks.

Earthquake moved for summary judgment on the questions of liability for infringement and entitlement to attorney's fees. On October 10, 1997, the district court granted Earthquake's motion. The district court determined that Bumper was infringing Earthquake's "Earthquake" and "Bass-Quake" marks, ordered Bumper to pay damages in an amount to be determined later, and imposed a permanent injunction. The district court also determined that the infringement was willful, deliberate and knowing. The district court therefore ordered Bumper to pay Earthquake's attorney's fees and costs pursuant to 15 U.S.C. § 1117(a), but deferred consideration of the amount of the fees until a later date. Bumper then filed Rule 59(e) and Rule 60(b) motions, both of which were denied.

Bumper appealed. In Earthquake Sound Corp. v. Bumper Indus., Inc., 188 F.3d 513, 1999 WL 638681 (9th Cir. Aug.18, 1999) (unpublished memorandum), we affirmed as to liability for infringement of the "Earthquake" mark and upheld the permanent injunction. (Accordingly, we focus only on the "Earthquake" mark in the present appeals.) As for damages and attorney's fees, we held that we did not have jurisdiction to consider these issues because the district court had not yet determined the amounts, and there was thus no final order.

Subsequently, Earthquake filed a motion with the district court for its attorney's fees, but decided to forego its compensatory damages award. In an order entered June 29, 2000 ("First Fee Order"), the district court determined that the amount of Earthquake's attorney's fees was $109,367.00 and that its costs were $2416.98. The First Fee Order concerned only the amount of fees and costs and did not address the question of Earthquake's entitlement to them. Bumper's only opposition to the amount of fees was to note that its gross sales from the infringing products had been only $25,000. The First Fee Order is the subject of the appeal in No. 00-16532.

After the district court entered the First Fee Order, Bumper filed a motion for a stay of enforcement and for a waiver or reduction of the supersedeas bond. The district court denied the motion and found that it was frivolous and had been filed in bad faith. The district court, pursuant to its inherent powers, ordered Bumper to pay Earthquake's attorney's fees incurred in defending the motion. In an order entered January 8, 2001 ("Second Fee Order"), the district court awarded Earthquake $2893.50 in attorney's fees in relation to the motion. The Second Fee Order is the subject of the appeal in No. 01-15121.

On March 8, 2001, while the present appeals were pending, we ordered a limited remand to the district court pursuant to Crateo, Inc. v. Intermark, Inc., 536 F.2d 862 (9th Cir.1976). The limited purpose of the remand was to allow the district court to articulate its method in determining the amount of the First Fee Order. The district court then entered an order on July 25, 2001, stating the methodology used for the First Fee Order. We describe this order more fully below.

B. The Infringement

When the district court ruled on the summary judgment motion establishing Earthquake's entitlement to attorney's fees, the record contained substantial undisputed evidence bearing on both infringement and willfulness. Earthquake had been using its "Earthquake" mark continuously since 1988. Earthquake eventually registered its "Earthquake" mark and, later, the mark became incontestable. Earthquake was enjoying success with its "Earthquake" products as of the early 1990s.

Bumper became aware of the "Earthquake" mark in 1990 when it attended a trade show that Earthquake was also attending. Bumper sells the same type of product as Earthquake, i.e., car audio products such as speakers. Bumper competes with Earthquake, and they use the same marketing channels. Although the "Carquake" and "Earthquake" marks are visually distinct, they have an obvious aural and connotative similarity. There was some dispute in the evidence concerning whether the consumers of car audio products were sufficiently sophisticated in their purchasing decisions such that they would not be confused as to who was selling the "Carquake" products.

Bumper filed an intent-to-use application with the United States Patent and Trademark Office ("PTO") relating to its "Carquake" mark in July 1993. The next month, August 1993, Bumper contacted at least one of Earthquake's distributors to market "Carquake" audio products. Bumper told this distributor that its products were the same as Earthquake's products, only cheaper. Bumper's "Carquake" products had model numbers that were nearly identical to the ones used by Earthquake, and it designated its products "CQ", which was similar to the "EQ" used on Earthquake's "Earthquake" line. Also, the warranty for at least some of the "Carquake" products does not state Bumper's name anywhere on it, but rather requires consumers to ship defective goods to the "CARQUAKE Warranty Service Center" and provides a street address.

In September 1993, after Earthquake learned of Bumper's actions, it called Ray Behnejad, Bumper's Vice President, and demanded that Bumper stop using the "Carquake" mark to sell car audio products. There is some dispute as to what transpired during the call. As of the time that the district court ruled on the summary judgment motion, the record contained undisputed evidence that, during that call, Behnejad agreed to stop using the "Carquake" mark. This fact was contained in the Declaration of Joseph Sahyoun and referenced in Earthquake's memorandum of points and authorities, both of which were filed concurrently with its summary judgment motion. This fact, however, was not mentioned in Earthquake's statement of undisputed facts, which was also filed with the motion. The district court referred to this fact in its order granting Earthquake's motion, correctly noting that Earthquake had offered undisputed evidence of Bumper's agreement to stop using the "Carquake" mark. The district also stated that Earthquake had offered evidence of an admission by Bumper that its mark was causing confusion. To the extent that the district court inferred this admission from the Sahyoun Declaration's statement regarding Bumper's agreement to stop using the "Carquake" mark, we note that the Sahyoun Declaration indicates only that Bumper agreed to stop using the mark, but not that Bumper admitted to a likelihood of confusion. After the district court's order, Bumper filed a Rule 59 motion on October 23, 1997. In the Rule 59 motion, Bumper asserted that it had made no such agreement to stop using the "Carquake" mark, but did not submit any supporting evidence. Nearly two and a half years later, on February 11, 2000, when Bumper sought to further contest Earthquake's entitlement to attorney's fees prior to the First Fee Order, Bumper submitted a Declaration of Ray Behnejad in which Behnejad denied having agreed to stop using the "Carquake" mark.

Despite Earthquake's contact with Bumper in September 1993 regarding the "Carquake" mark, Bumper continued on course with its "Carquake" campaign. Bumper could not recall having consulted at this time with an attorney, or making any investigation, about possible trademark infringement.

In November 1993, Bumper's application to publish its "Carquake" mark was approved by a PTO examining attorney. The application was published in January 1994. When Earthquake saw the application, it filed an opposition with the Trademark Trial and Appeal Board. Those proceedings were suspended once this case began.

After the publication of the "Carquake" application, Bumper introduced its "Carquake" speakers at the 1994 Consumer Electronics Show ("CES"). Several consumers and dealers attending the 1994 CES informed Earthquake that they believed the "Carquake" products to be an extension of Earthquake's line. In February 1994, Earthquake sent a letter to Bumper reiterating its concern about trademark infringement. In December 1994, Earthquake sent another letter to Bumper, this time stating that it would file suit against Bumper if Bumper did not agree to stop using the "Carquake" mark. Bumper did not respond to the letter. Instead, Bumper promoted its "Carquake" products at the 1995 CES. As with the 1994 CES, consumers and dealers were confused by the "Carquake" products. After the 1995 CES, Earthquake filed the present case....